Friday, November 8, 2013

TBT: Profit from higher interest rates

Interest rate sensitive ETF's reacted on Government job numbers strongly today. TBT jumped above the recent 2 month long down trending channel with strong volume. My naked put Dec$70p sold about 10 days ago reached most of its profit with current Delta 0.09 in a surprising period of short time. So I bought them back for $0.25 each to nail down the profits and initiated some June$73c contracts for a longer term trade at the cost of $8.5 each. My stop loss will be around the recent low of $71. If TBT pulls back without heavy volume, I'll look for an opportunity to double my contracts. I'm impressed by the large pullback yesterday and the huge breakout today. The trade is consistent with my long term view of the interest rate rise. I'll change it to diagonal call spread later when I see TBT become far extended in price.

Another major beneficiary of the rising interest rate is the regional banks ETF KRE which also made an impressive breakout with huge volume today. I'll continue to investigate the possibility of playing with this ETF in the future. The real estate ETF's IYR got hammered again as a result.

Created with ProphetCharts®

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